Dutch companies claim pension indexation ruling could bankrupt them

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NETHERLANDS - The Energy Research Centre Netherlands (ECN) and the Nuclear Research and Consultancy Group (NRG) have claimed that their continued existence is at risk if they carry out a court order for a mandatory pensions indexation.

Following an appeal by former employees, the Amsterdam court of justice decided ECN and NRG had "unfairly economised" on the regulations for pensions indexation in 2006.

The companies said the ruling could involve as much as €5m in unplanned costs a year.

The former workers, who set up the association OMEN, have been up in arms since 2002 over the companies' previous decision to stop granting indexation.

In 1990, ECN/NRG decided to raise the long-time unconditional indexation of 3% to a maximum of 6%, depending on inflation.

At the same time, it chose to finance the indexation of the insured pension plan from the extra returns on the premium reserve of the pensions that had already taken effect.

The amount of €22m that had become available as a result was deposited for a 10-year period against an interest rate of 8.3% at insurer Centraal Beheer Achmea.

However, the funds, earmarked for indexation, had disappeared by 2003, and some of those funds, according to OMEN, made their way into the companies' general assets.

After the court accepted the former employees' demand for full indexation, ECN/NRG paid the overdue allowance, but they decided one year later to make indexation conditional.

OMEN claims this decision had been made unilaterally.

A spokesman at OMEN said he did not believe ECN/NRG would go bust.

"Due to international research obligations, the government won't let it happen," he said.

"However, if the companies do go bust, it is not our problem. They have profited from the funds for indexation, which would have enabled them to pay our inflation compensation for a long time."

A spokeswoman for ECN/NRG denied that the assets earmarked for indexation had disappeared into the companies' coffers.

"In accordance with regulations, assets have been taken from the returns on the depot to pay for indexation as well as for regular pension contributions," she said.

She added that the indexation had to be made conditional in 2007 because the court deemed the initial regulations on indexation as unconditional promises.

ECN/NRG are now weighing their options on a final appeal with the high court.